Credit Counseling

[Avondale Red Rage]

looking for professinal assistance for adults who have not handled finances well and want to get out of debt.

 

[Brian in Mesa]

I seriously recommend Dave Ramsey's FPU (Financial Peace University) and/or picking up his book Financial Peace or My Total Money Makeover. He hosts a daily radio show (on 92.3 FM here in AZ).

Wife and I are debt free except our house and several others on ASFN can share about getting out of debt "Dave's way" - which is a common sense approach to money.

 

[thirty-two]

I seriously recommend Dave Ramsey's FPU (Financial Peace University) and/or picking up his book Financial Peace or My Total Money Makeover. He hosts a daily radio show (on 92.3 FM here in AZ).

Wife and I are debt free except our house and several others on ASFN can share about getting out of debt "Dave's way" - which is a common sense approach to money.

I second this. Dave Ramsey's book "The Total Money Makeover" changed my life. It takes HARD WORK and doing things you dont want to do (aka... working an extra 30 hours a week) but the positives that come from it cannot be denied. I cannot wait until the day I can scream that I am DEBT FREE.

 

[jw7]

Agree with BIM and Kate. Spend $15 and get a Dave Ramsey book first before hiring a professional. He lays out a step-by-step plan for getting out of debt.

I'd also read "The official Dave Ramsey thread" in this forum for more opinions.

 

[Avondale Red Rage]

Sounds like I'll start with a trip to B & N today. Thanks!

 

[Jersey Girl]

If you decide to go the credit counseling route, look into American Consumer Credit Counseling. A coworker of mine has been working with them for some time. He has great things to say about them. They sat down and went through his bills and then determined what he had left to pay out for debt. They negotiated and turn it all into one payment. He did say he has to pay the agency a monthly fee ($15, I think), but he was in really deep and needed their help.

Personally, I am trying to manage my debt on my own. It's tough and it does require sacrifices (ie working a second job like Kate), but I look forward to the day when all of this is over and I can say "I did it!"

 

[conraddobler]

Depends on how bad the situation is.

Real bad I'd also consider talking to a attourney who does bankruptcies.

Dave's book is great if the situation is fixable, most are but then again I've seen some that are beyond hope, it all depends.

 

[Avondale Red Rage]

We need to get out of debt in a marriage where we both avoid the pain of budgeting and sticking to it like the plague. It will be a matter of working together to get debt free so we no longer worry about being one bad illness or lost job away from disaster.

 

[conraddobler]

We need to get out of debt in a marriage where we both avoid the pain of budgeting and sticking to it like the plague. It will be a matter of working together to get debt free so we no longer worry about being one bad illness or lost job away from disaster.

Dave pretty much advises to zero out your credit score, personally I'm not a fan of that one, if you have the discipline not to have credit you have the same discipline not to use it IMO.

One great way to make an easy impact is to pay cash for everything you can.

Using debit cards leads to easy come easy go thinking, actually shelling out the cash for stuff is physical and tangible, and it hits home a lot harder.

Try that first, as you watch the stuff flee your hands it begins to dawn on you where you're wasting money or spending when you wouldn't otherwise, just try it with $500 bucks at first, it's fun and bizzare at first but after a while it'll grow on you.

My wife and I did that, she went from spending whatever to being able to save surprising amounts of money, all because it was real money not just debit/credit cards.

She of course spent it later on but only on stuff she really wanted, and she did put back half what she saved which was nice

One key is what income do you have?

Not the amount but is it steady?

Steady income is very important because it gives you an idea of what you can actually count on, most of the people I see with debt problems can beat it if the income is steady and it's enough to work with, if not then like Dave says you have to start selling stuff and or making more income to beat it.

A couple of rules of thumb to live your life by also.

Make sure your housing expense is no more than 29% of your income, that's top end, higher than that causes you generally to be house or rent poor.

Also make sure your total debts including your house/rent payment are no more than 36% of your income.

Again that's a goal to shoot for and a measuring stick to live by, more than that will cause you problems more often than not.

Those percentages are calculated as follows.

Rent/house payment divided by your gross combined income.

Don't count overtime or bonuses unless they are rock steady and regular.

So if you make 20$ an hour thats 40 x 20 * 52 /12 = 41,600 / 12 = 3466 per month.

If your rent is 1000 a month that's 1000 / 3466 or 28.85% close enough.

Now if on top of that you have credit payments, "don't count light bills or water bills, only debt payments" of say:

30 credit card
150 loan
500 car payment

that's 680 + 1000 for house or rent / 3466 or 48.47, way too high for comfort.

That's the more important number, if you're a tad high on the house but ok overall, you're probably going to be ok over time as a rule of thumb, but if the overall is too high, that's bad.

Now what I layed out is not going to assure you won't have problems, there are a ton of variables, if you both work then one person losing your job is going to crush you more than likely.

Run the numbers on just one or the other of your incomes, plan on the worst happening, that's why I wouldn't go to the very edge, because things happen all the time.

You should be striving to save enough like Dave says to get 6 months income liquid cash put back for rainy days first, then work the debt down from there.

The first step is to never borrow AGAIN, then work the debt down.

The debt paying down thing is simple, you pay all you can on the smallest debt first, say you pay 300$ extra on a 1k debt and in about 3 months it's gone, now you take the 300 you paid on that, add it to the payment of the next debt in line and pay that on that one, say it was 100$, when that debt is done, you take the 400$ and go to the next one up and so on.

Dave really says common sense stuff, if you have a car that is busting your budget, sell it if you can and then buy a beat down car for cash, use the savings to payoff debts or build your emergency fund.

The key here is both people have to be a team, if one isn't buying in it won't work.

Hope that helps.

 

[Beaver]

I was reading some reviews of Dave Ramsey's book. How much does he bring up god in your journey to being debt free? I don't think I could handle that.

 

[Brian in Mesa]

I was reading some reviews of Dave Ramsey's book. How much does he bring up god in your journey to being debt free? I don't think I could handle that.

Some, but not too much. He is a Christian so his faith is a part of him and he relates debt to his faith and the Bible in that God never blessed anyone with debt.

Most people get money advice from broke people...I prefer money advice from someone who has been deep in debt (due to real estate losses mostly) and clawed his way out to be debt-free and manages his money rather than letting his money manage him...

 

[thirty-two]

I was reading some reviews of Dave Ramsey's book. How much does he bring up god in your journey to being debt free? I don't think I could handle that.

Beaver, I am not religious at all and it didnt bother me too much. He quotes a couple of verses, but it's pretty much pertaining to money.

 

[Mulli]

Who would listen to money advice from broke people?

 

[Beaver]

Thanks. I am looking for ways to pay off my college debt.

 

[dreamcastrocks]

Who would listen to money advice from broke people?

Exactly.

Conversely, I get weird looks when I give diet/weight loss advice. People think that because I am not overweight, I don't know what I'm talking about. Weird.

 

[Mulli]

Exactly.

Conversely, I get weird looks when I give diet/weight loss advice. People think that because I am not overweight, I don't know what I'm talking about. Weird.

Judges also would have accepted:

"Other poor people."

 

[Linderbee]

Exactly.

Conversely, I get weird looks when I give diet/weight loss advice. People think that because I am not overweight, I don't know what I'm talking about. Weird.

Yes, you get weird looks/comments because you have no idea what it takes to lose weight (since you've never had to), and have never had issues with gaining weight.

 

[dreamcastrocks]

Yes, you get weird looks/comments because you have no idea what it takes to lose weight (since you've never had to), and have never had issues with gaining weight.

I know what it takes to keep off the weight which is just as important.

 

[Jersey Girl]

I know what it takes to keep off the weight which is just as important.

True, but there's something to be said for someone who has a personal connection to the experience. I equate it to not going to see a male gyno.

 

[LVG]

I know what it takes to keep off the weight which is just as important.

Having a thyroid that works?

 

[LVG]

I equate it to not going to see a male gyno.

An andrologist?

 

[Linderbee]

I know what it takes to keep off the weight which is just as important.

No, you really don't. If anyone that had weight issues ate like you did, they'd do nothing but gain.

Someday your metabolism will slow down, and then maybe you'd have room to comment.

 

[Russ Smith]

I would add there's a difference between credit counseling and debt consolidation and be very careful that you understand which of the two you're signing up for and which of the two you want. A friend of mine went the consolidation route against my advice.

She's paying them a monthly fee and was instructed to stop paying on all her credit cards and they would handle things. One of the card companies has already sued her, I helped her get the right documents from the local court to file in response to the suit. The debt company told her to fill out some form about the suit and then her rep didn't respond, she was eventually told that person no longer worked there and another person would take over. She wound up doing the whole filing herself and still doesn't know if she has to go to court or not. All of that was supposed to be covered in her monthly fee.

We googled the company and their ratings are horrible with the Better Business Bureau, in fact BBB advised against ANY debt consolidation company they said many of them are not honest and you can do it yourself without paying them to do it for you.

I think she will end up in bankruptcy, she says she was told before she signed up for the consolidation that if she wound up in bankruptcy she would have to continue to pay them as part of their contract. Sounds totally unenforceable to me I thought only things like IRS, and child support were immune to bankruptcy filings. She may have ended up there anyways but the debt consolidation didn't help her at all. They claimed to be a credit counseling outfit they saw what she owed, her credit history and score, and then recommended the consolidation route, I suspect they do that with everyone.

I've seen some of Dave Ramsey on tv he does seem like he has some very useful ideas and makes a lot more sense than what my friend ended up doing.

 

[conraddobler]

I would add there's a difference between credit counseling and debt consolidation and be very careful that you understand which of the two you're signing up for and which of the two you want. A friend of mine went the consolidation route against my advice.

She's paying them a monthly fee and was instructed to stop paying on all her credit cards and they would handle things. One of the card companies has already sued her, I helped her get the right documents from the local court to file in response to the suit. The debt company told her to fill out some form about the suit and then her rep didn't respond, she was eventually told that person no longer worked there and another person would take over. She wound up doing the whole filing herself and still doesn't know if she has to go to court or not. All of that was supposed to be covered in her monthly fee.

We googled the company and their ratings are horrible with the Better Business Bureau, in fact BBB advised against ANY debt consolidation company they said many of them are not honest and you can do it yourself without paying them to do it for you.

I think she will end up in bankruptcy, she says she was told before she signed up for the consolidation that if she wound up in bankruptcy she would have to continue to pay them as part of their contract. Sounds totally unenforceable to me I thought only things like IRS, and child support were immune to bankruptcy filings. She may have ended up there anyways but the debt consolidation didn't help her at all. They claimed to be a credit counseling outfit they saw what she owed, her credit history and score, and then recommended the consolidation route, I suspect they do that with everyone.

I've seen some of Dave Ramsey on tv he does seem like he has some very useful ideas and makes a lot more sense than what my friend ended up doing.

I think I remember hearing Dave's filed for bankruptcy before, not sure if that's true or not but I thought he talked about it once, I know now he's dead set against it.

Personally I've told some people to check with an attourney on filing, simply because it was impractical for them to likely payoff their debts in less than a very long time.

BK hurts your credit for about 2 years hard, then after that not so much, you can even get an FHA loan 1 year into a Chapter 13 while you're in the plan if you make all your payments on time and you rehabilitate your credit score, I've seen it done.

 

[Brian in Mesa]

I think I remember hearing Dave's filed for bankruptcy before, not sure if that's true or not but I thought he talked about it once, I know now he's dead set against it.

At 26 he had a real estate portfolio worth $4 million. One of his largest creditors was sold to a larger bank, which began to take a harder look at his borrowing habits. The bank demanded he pay $1.2 million worth of short-term notes within 90 days.

So yes - he used to borrow and he once filed bankruptcy.

He's done stupid with zeroes behind it with money. But he also learned from his mistakes and re-made millions by not using debt and teaching people how to get rid of debt and manage their money.

Most times people can steer clear of bankruptcy by following his advice. It usually takes writing everything down, planning a budget, and taking on an extra job (or two) if necessary to attack their debt.